Sacramento Bee--Dan Weintraub column: Expected Referendum on Ballot

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"Beiser, Megan" <Megan.Beiser@edelman.com<
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Subject: Sacramento Bee--Dan Weintraub column: Consumer rep envisions ulti
mate confrontation

< Team,
< This is the best synopsis we've seen of Harvey Rosenfield's motivations
< for putting a referendum on the ballot.
< **********************************
< Daniel Weintraub: Consumer rep envisions ultimate confrontation
< Sacramento Bee
< May 15, 2001
<
< Now that Gov. Gray Davis has rallied his fellow Democrats, run over the
< Republican opposition in the Legislature and set the state on a course to
< borrow $13 billion to pay for a few months of electricity purchases,
< there's probably only one person who can stop him: Harvey Rosenfield.
< Rosenfield is the Santa Monica-based consumer advocate who tried to halt
< California's experiment in electricity deregulation before it got started.
< His 1998 ballot measure failed, and that campaign is blamed in some
< circles for delaying construction of new power plants just long enough to
< cause the electricity shortage that's helped send prices heavenward.
< But if Rosenfield's last ballot initiative got the state's energy
< establishment in a snit, the one he's contemplating now would positively
< push them over the edge. He is seriously considering launching a signature
< drive to force a referendum on the legislation Davis just signed to
< authorize his $13 billion energy bond measure.
< That bond, to be repaid by ratepayers, is supposed to reimburse the
< state's general fund for the cost of electricity the state has been buying
< for consumers since January, when Pacific Gas & Electric and Southern
< California Edison ran out of money. The bond measure also will be used to
< delay the pain of the extremely high prices expected this summer. Without
< it, consumers would immediately face another staggering rate increase,
< probably well into triple digits.
< The alternative would be a state budget in shambles. All the tax money
< Davis has spent on electricity this year already was earmarked for
< traditional services such as education, roads and health care. A
< referendum that killed the bond measure would leave a gaping hole in the
< budget that could only be filled by a huge tax increase or unprecedented
< spending cuts.
< Rosenfield is something of a publicity hound, and his talk of a referendum
< may be just that. Collecting 750,000 signatures in less than 90 days,
< which is what's required to qualify the referendum, would be a massive
< undertaking. Even Rosenfield concedes that the chances are no better than
< 50-50 that he will proceed. But this is a man who has qualified two
< measures for the ballot already, including one in 1988 that brought on
< regulation of the California insurance industry. You have to take him
< seriously.
< The question is why he would even consider it. Why would a man who fancies
< himself a friend of the ratepayer ponder a move that would force consumers
< to swallow a massive rate hike, or else bankrupt the state? Because
< Rosenfield's goal is to see the destruction of the entire private power
< system that's now serving California -- and raking in enormous profits for
< its owners.
< And if it were up to him, he'd be willing to risk economic catastrophe to
< make it happen. His theory is that the power generators will simply keep
< raising their prices as long as the governor keeps putting more money on
< the table. It is, he says, like giving crack to an addict. Take that money
< away, and the generators will kick the habit, fast.
< "If bleeding dry the general fund is foreclosed, and politically or as a
< matter of economics you can't raise rates that high in the state, the only
< thing the governor can do is turn to the generators and say, 'I'm taking
< your plants.' At which point they will say, 'OK, all right, we're lowering
< our prices,' or some face-saving thing will happen. The ultimate showdown
< between naked capitalism and populist outrage occurs." And he's convinced
< that capitalism will blink.
< "If the lights go off in California, and the economy goes down the tubes,
< then 20 years of Republican ideology, of less government, free markets,
< competition -- all of that goes down the tubes.
< "All you have to do is look at history to see that when there have been
< economic cataclysms that have decimated the economy, people want action
< and they'll do anything, whether its seizing private property, or
< whatever. There will be a revolution, and I don't think the political
< institutions in this country are prepared to push things to that point."
< The Legislature already has set a Nov. 15 deadline after which the state
< budget is supposed to be off-limits to Davis' power-buying ways. But
< that's not good enough for Rosenfield. By then, he thinks, Davis will have
< burned through the entire proceeds of the first bond measure and the total
< tab will be approaching $20 billion. Rates will have to rise again to pay
< that bill.
< Rosenfield is prescribing an economic amputation -- without anesthesia --
< to stop a painful and dangerous infection. But he is not the only one
< thinking about the doomsday scenario.
< The power generators themselves have lately been lining up to try to cut
< deals with the state. They have offered to take caps on their profits,
< forgive some of the debt that's owed them, anything to keep the system
< running without further provoking the public's ire. They know that
< Rosenfield's kind of anger can be contagious. They want to contain it
< before it spreads.
<
<
< The Bee's Daniel Weintraub can be reached at (916) 321-1914 or at
< dweintraub@sacbee.com <mailto:dweintraub@sacbee.com<.
<
<
<